A look back at the companies that defined the prior two tech cycles shows the possibilities for Nvidia as technology transitions into a period fueled by AI.
Nvidia Corp.’s sales of hardware needed for artificial intelligence have taken off and sent the chip maker’s stock into the stratosphere, early proof that a new era has arrived for tech.
As the internet arrived in the 1990s, a hardware company convinced investors that the dot-com boom was real, showing similar huge revenue gains to what Nvidia is sporting today. Cisco Systems Inc. CSCO, -0.83%, which makes the networking gear that companies needed to take advantage of the internet, saw revenue jump from less than $2 billion in its 1995 fiscal year to more than $4 billion in 1996.
Eventually, that money did flow to the internet, but it took the rise of smartphones to truly realize the promises made during the late 1990s. Apple Inc. AAPL, +0.26% introduced the iPhone in 2007 and immediately saw sales gains that vaulted into the stratosphere in 2010 with an increase of nearly 80%. By 2012, Apple was reporting revenue that more than sextupled its 2007 sales, and the mobile era was truly upon us.
For Apple, though, there was a near-immediate wave of innovation that created mobile apps like Uber Technologies Inc.’s UBER, +1.13% ride-hailing service and Snap Inc.’s SNAP, Snapchat. The iPhone era gave a second wind to services developed for personal computers, such as Meta Platforms Inc.’s META, +0.48% Facebook and Netflix Inc.’s NFLX, streaming service.
For Nvidia to follow Apple’s example, those customers will need to succeed with their new offerings no more than a couple of years down the road. Nvidia executives have not provided financial guidance more than a quarter ahead, but analysts have suggested this wave of investment is unlikely to continue beyond that without such a surge from other tech companies.
Examples of huge demand for chips building and then suddenly disappearing are prevalent in Nvidia’s history. Demand for cards used to mine cryptocurrency fell off in 2018, leading to a “crypto hangover,” and the end of pandemic-era demand for gaming cards last year dinged sales and the company’s stock ahead of the current spike.
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